Monday, October 17, 2011

Washington – A first-ever audit ordered by an amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act shows the Federal Reserve made $16 trillion in loans to foreign central banks during the period 2007-2010.

"No agency of the United States government should be allowed to bail out a foreign bank or corporation without the direct approval of Congress and the president," said Senator Bernie Sanders, I-Vt., author of the amendment.

"In 2009 and 2010, FRBNY also executed large-scale purchases of agency mortgage-backed securities to support the housing market," the auditors stated in the report.

At that time, U.S. Treasury Secretary Tim Geithner was chairman of the Federal Reserve Bank of New York.

Having found numerous conflicts of interest, the GAO auditors recommended that "Going forward, to further strengthen policies for selecting vendors, ensuring the transparency and consistency of decision making involving the implementation of any future emergency programs, and managing risks related to these programs, the Chairman of the Federal Reserve Board should direct Federal Reserve Board and Reserve Bank staff, as part of the Federal Reserve System's planned review of the Reserve Banks' codes of conduct given their expanded statutory authority under the Dodd-Frank Act, to consider how Reserve Banks' experience managing employee conflicts of interest, including those related to certain nonbank institutions that participated in the emergency programs, could inform the need for changes to the Reserve Banks' conflict policies."

According to a statement released by Sen. Sanders' office, “Among the investigation's key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland...